NE Asia producers mull replacing naphtha with LPG

01 April 2008 09:44  [Source: ICIS news]

SINGAPORE (ICIS news)-- Northeast Asian naphtha end-users were considering whether to buy liquefied petroleum gas (LPG) to replace high priced naphtha as feedstock, industry sources said on Tuesday.

 

South Korea’s LG Chemical and Samsung Total, and Japan’s Mitsui Chemical could switch to LPG as an alternative feedstock due to naphtha prices being at record high levels.

 

However, the companies would only replace about 20% of their naphtha consumption, hence they would still be highly dependent on the expensive feedstock, the sources added.

 

The switch normally takes place over the summer season from May-July as LPG demand for heating during the cold weather tapers off.

 

The economics for the switch would be when LPG (butane) prices are 90% of naphtha prices.

 

Of course, some end-users could do so at over 90%. A few end-users in Asia had earlier been forced to cut operating rates at its naphtha crackers due to poor margins from high priced naphtha.

 

LPG prices were at around $835-840/tonne CFR (cost and freight) Japan while naphtha prices for first half of May closed at $909.00-910.00/tonne CFR Japan on Monday.

 

As of 1 April, the import tax of 1.5% on LPG into Korea will be abolished. This could prompt more imports of LPG to substitute naphtha by Korean end-users.

 

Taiwan's Formosa Petrochemical Corp recently bought 44,000 tonnes of LPG for delivery in the first half of May and might purchase more in the second half of May in a bid to replace naphtha feedstock.

 

The margins from aromatics were not good, so it made sense to use LPG which yielded higher ethylene and more olefins, sources said.

 

However, LPG could not produce butadiene, where the profit came from, a source added.

 

Due to the planned switch by LG Chem, the output of aromatics could come down marginally, said a source close to the company.

 

The company produces at its Yeosu-based plant about 220,000 tonnes/year of benzene, 100,000 tonnes/year of toluene and 55,000 tonnes/year of solvent grade xylene.

 

Butadiene prices were last assessed at $1,800-1,820 CFR Northeast Asia, according to global market intelligence service ICIS pricing.

 

Brian Myung, Mahua Chakravarty contributed to this article

 

For more on naphtha see ICIS chemical intelligence

By: Desmond Chia
+65 6780 4359

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